Hard lockdowns were catastrophic for economies, businesses and employment. In the global and domestic context, we are all each other’s customers and suppliers. The shocks were both on the demand and supply side, and imports and exports were equally affected.
Countries that had decided to keep their borders open found it pointless when another country had closed its borders. Ships that were docked for too long had to go out to sea, just to keep moving to avoid erosion of the vessels. Expenses on one side, no income on the other.
Air passenger traffic was down 60% compared to 2019 and foot traffic in airports were down 61%, which amounts to about 104.5 billion US dollars. Tourism took a heavy knock with 100% of worldwide destinations having travel restrictions.
Other than China, 2nd quarter quarter-on-quarter GDP numbers for most countries had fallen dramatically.
America: - 31.40%
UK: - 20.40%
Germany: - 10.10%
South Africa: - 51.00%
China was up + 11.50%
Of course, GDP prints are reflective of economic activity on the ground. A contraction in GDP is a contraction of business activity which meant that unemployment was about to sky-rocket. There was blood on the streets.
It was time for world leaders to make tough decisions – after all, as much as Covid kills, so does hunger. The Covid infection curves were just about to flatten, lives were being saved, but livelihoods were being decimated.
The European Union leaders announced a coronavirus recovery deal of €750bn, including €390bn grants and €360bn low-interest loans. The International Monetary Fund approved a US$4.3-billion loan for South Africa to help combat the negative effects caused by the COVID-19 pandemic. The loan will not affect SA’s sovereignty and will be based on a low interest rate.
On the monetary policy side, aiming to mitigate the economic impact of the Covid-19 pandemic, the SARB cuts interest rates by another 25 basis points bringing the total rate cut to 300bps in 2020. They also announced that they will extend their monetary tool kit by adding short-term, bilateral reverse repurchases of government bonds from commercial banks to manage market liquidity.
On the fiscal policy, the South African government announced 50 strategic infrastructure projects and 12 special projects. This will be the first tranche of the R360 billion infrastructure investment program that will focus on economic recover post COVID-19. However, all these plans mean nothing if not implemented and an active economy is required to get the ball rolling.
The economy was ailing which would result in reduced tax collections. Social grants were never going to be sustainable. We needed to get the economy going again and South Africa moved to less stringent lockdown levels. Restrictions on interprovincial travel were lifted. In this regard, accommodation, hospitality venues and tours were permitted to operate. Restrictions on the sale of tobacco and alcohol were lifted and restaurants, bars, and taverns were also permitted to operate.
Professional sporting events around the world were back online with no fans allowed in the arenas. Liverpool went on to win the league (after having suffered their first defeat by the now relegated Watford) and Kaizer Chiefs dropped the ball at the very last minute to be pipped by Mamelodi Sundowns as league champions.
The Los Angeles Lakers, led by Lebron James, won the NBA Championship in what looks like a beautiful send off for the late former Lakers player Kobe Bryant.
When it looked like we were turning the corner, a large amount of ammonium nitrate stored at the port of the city of Beirut, the capital of Lebanon, exploded causing at least 204 deaths, 6,500 injuries, US$15 billion in property damage, and leaving an estimated 300,000 people homeless.
Year 2020 kept on punching relentlessly...